Jet Airways rallies on deal closure reports with Etihad Airways

MUMBAI: Shares of Jet Airways surged over 19 per cent in trade on Wednesday following reports that the airliner has concluded deal with Abu Dhabi-based Etihad Airways, ET Now reported.

At 02:10 pm, the stock pared some of the gains and was trading at Rs 527.35, up 17.49 per cent, on the BSE. It touched a high of Rs 537.75 and a low of Rs 450 in trade today.

Etihad has paid a token amount of $70 million to Jet Airways which the latter will use for buying three slots at London airport to buy Heathrow slots, sources told ET Now.

Etihad Airways is likely to buy 24 per cent stake in Jet Airways for $400 million, and will likely pay $400 million in the first tranche of the deal.

The stock jumped sharply over 11 per cent in the month of January largely on anticipation of the deal. However, analysts feel that the long term sector fundamentals do not really support the valuations as the hike in stock price was more event-driven.

The stock has lost close to 15 per cent so far in the month of February largely on account of uncertainty revolving around the Jet-Etihad deal that it has hit a roadblock.

Amber Dubey of KPMG said, "We were confident that the deal would have gone through as it bodes well for both the airlines. With the deal coming through, Jet Airways not only gets access to funds but also global network of Etihad along with synergy benefits."

"For Etihad, India is strategic market and the deal would get the UAE based carrier access to Indian consumers and route sharing. It's a win-win situation for both the airlines," added Dubey.

Dubey is positive on the Indian aviation sector and believes it is a great story in the long run. "Although we had several short-term challenges on cost structures and macro economic challenges; but with 1 per cent flier base, the aviation sector has a long way to go," he said.

Technical view: Ashwani Gujral of ashwanigujral.com

Gujral advises investors to tread with caution in Jet Airways as no airline has made money in this sector despite growth in the sector. He advises retail investors not to enter Jet as its operations will change dramatically.

At levels around Rs 550-600, the stock gets fully priced and if one is already invested, it's the time to book profits. There is a possibility that the stocks may come back to levels around Rs 400 once we are done with deal euphoria.